Businesses often use non-compete agreements to prevent employees from either taking a job with a competitor or from starting a competing business for some period of time after leaving employment. Non-compete agreements are allowed in Texas. Courts will uphold a non-compete agreement which is reasonable in time, space, and scope and which does not impose a greater restraint than necessary to protect legitimate business interests.
Is a Non-Compete Agreement Legally Enforceable in Texas?
Texas Business and Commercial Code section 15.50 governs the making of non-compete agreements. It provides that correctly drawn non-compete agreements that comply with the terms of the statute can be enforced. [1]
What Can Be Protected?
In Texas, a non-compete agreement can be used to protect trade secrets; confidential or proprietary information; goodwill. A non-compete agreement can also be used to protect and recoup an employer’s investment in employee specialized training.
Reasonable Uses and Objections
- Enforceable when terminated without cause? Yes
- Employee non-solicitation agreement permitted? Yes
- Customer non-solicitation agreements permitted? Yes
- Does continuing employment equal sufficient consideration? No
- Statute of Limitations for breach of contract: 4 years
Texas Non-Compete Limitations
Time limitations
Texas Business and Commercial Code section 15.50 (a) requires that non-compete agreements must have a clearly defined limitation of time which is reasonable.
Geographical limitations
The Texas statute also requires that non-compete agreements must have a clearly defined limitation of geographical area.
Other limitations
Texas Business and Commercial Code section 15.50 (a) applies to all non-compete agreements. All non-compete agreements must be ancillary or a part of some other agreement which is otherwise enforceable. A stand-alone non-compete agreement does not appear to be permitted according to the terms of the Texas Business and Commercial Code
Special limitations apply to non-compete agreements covering physicians in Texas. To be enforceable in Texas, in addition to the other requirements for a non-compete agreement, a non-compete agreement covering a physician must provide:
- The physician must be allowed to have access to the list of patients that he has seen or treated within one year prior to the termination of the employment contract;
- The physician must be allowed to have access to the medical records of the physician’s patients, upon authorization, and must be allowed to copy the medical records, subject to a reasonable fee;
- The agreement for access to the records must not require the records be kept or delivered in a format other than the one in which the records are usually maintained, except by mutual consent of the parties;
- The agreement must provide for a buy-out provision at a mutually agreeable price, or, if the parties cannot agree, must provide for an arbitrator or court determination of a reasonable price;
- The agreement must provide that the physician may continue to treat specific patients during the course of acute illness, even after the termination of employment.
Texas Non-Compete Agreement Sample
Below, you can download a Texas non-compete agreement in PDF and Word format:
Non-Compete Agreement
